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Office Depot's Sales Increase 4%

8/07/2006 02:00:00 AM Eastern

Sales of PCs, peripherals and private label products helped push net sales up 4 percent to $1.5 billion at Office Depot's U.S. and Canadian stores during the company's second quarter ended July 1.

Same store sales edged up 1 percent, representing the chain's 10th consecutive quarter of positive comps, although growth continued to slow from the respective 3 percent and 5 percent comp gains of the two preceding quarters.

Operating profit for Office Depot's North American retail division was $96 million for the three months, up 26 percent year-over-year despite a $1 million hit in second quarter charges.

As a percentage of sales, operating profit increased 110 basis points to 6.4 percent thanks to a continuation of gross margin expansion and a reduction in the division's cost structure. The chain achieved this by increasing product margins through better category management and increased sales of private label goods, and through cost management initiatives that lowered operating costs.

The resultant cost savings and improved gross margins “are more than offsetting incremental expenses” incurred through new store openings and ongoing store remodeling, the company said. Office Depot remodeled 49 stores during the quarter and opened another 22, bringing the total U.S. and Canadian store count to 1,071.

Inventory per store was $995,000 by the end of the three-month period, down from almost $1.1 million per store one year prior.

For the entire company total sales grew 4 percent to $3.5 billion, and net profits were up to 18 percent to $118 million for the second quarter.

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